MONTREAL (Reuters) - The London Bullion Market Association is working out ways for refiners on its Good Delivery List to avoid falling foul of new regulations against conflict gold as a “number one priority,” LBMA chairman David Gornall told Reuters on Sunday.
Due diligence requirements for gold sourced from the war-torn Democratic Republic of Congo are currently under consideration by both the United States and the Organization for Economic Cooperation and Development.
A proposal being considered under the Dodd-Frank financial oversight law would require companies to disclose whether they use “conflict minerals,” like gold, from the DRC.
The LBMA, whose Good Delivery List of refiners is the gold industry’s chief source of high-quality bullion, says the proposal could be disruptive to the refining industry if it is not swiftly addressed.
Speaking on the sidelines of the LBMA’s annual conference here, Gornall said: “We will issue guidance on conflict gold due diligence so that it is practical for the refiners and credible for the outside world.”
“The aim would be that the LBMA’s guidance will become the OECD’s guidance. We are after all the ultimate authority on physical gold, and therefore there can’t be anybody better placed to do it than us,” he added.
The association hopes to deliver guidance to members by the end of this year or early 2012, he said.
The World Gold Council, the largest industry group representing global gold miners, said in June that it had proposed standards allowing miners to certify their gold production as conflict-free.
But refiners have additional problems in proving the provenance of scrap gold they receive, 1,645 tons of which was returned to the market last year.
“If you’ve got primary mined gold, it is pretty straightforward where it’s come from and you can prove it,” said Gornall. “It’s the scrap that is” the problem.
“We are going to have to get to the stage where... we take everything that is in existence at the moment from a good delivery refiner to be considered as conflict free,” he said. “We have to draw a line and grandfather everything prior to that.”
As to whether this prove acceptable to U.S. regulators, he added: “That remains to be seen.”
Conflict minerals are a hot topic in the United States. Signatories to the Electronic Industry Citizenship Coalition (EICC), including Apple (AAPL.O) and Microsoft (MSFT.O), have agreed to curb the use of uncertified minerals from the DRC.
The EICC is pushing gold refiners to agree to spot checks on their activities, Gornall said. “We are trying to do something on a broader basis, that doesn’t involve individual audits through every one of the good delivery refiners,” he said.
“If we can get to a (regulation) that covers not just the conflict gold area but every part of due diligence, we will have done ourselves and the market a great service.”
The LBMA’s conference has been extended into Tuesday afternoon to include a special session on gold market regulation, said Gornall, who took over as the association’s chairman in June.
Regulatory issues are set to become a key concern in years to come as broader financial market regulation spreads, one LBMA delegate said on the sidelines of the event.